Blockchain Basics

1. What is Blockchain?

Blockchain is a decentralized, distributed ledger technology used to record information securely, transparently, and immutably across multiple participants. It consists of a series of chronologically linked “blocks,” each containing transaction data and the hash of the previous block, ensuring the integrity of the chain.

Key Features of Blockchain

  • Immutable: Once data is written to the chain, it is nearly impossible to alter
  • Transparent: Transactions on the chain are visible to everyone
  • Decentralized: No central authority; the network is maintained by multiple nodes
  • Fast Settlement: Cross-border transactions can be confirmed quickly without banks

Nodes collaborate through a distributed network to maintain the ledger, improving the system’s resistance to interference and trustworthiness.

2. Bitcoin and Blockchain

Bitcoin is the first widely adopted application of blockchain:

  • A cryptocurrency based on the blockchain network, incentivizing nodes with block rewards
  • Possesses monetary attributes like limited supply and transferability
  • Block time and consensus mechanisms determine network efficiency and security

The handbook also addresses common issues such as price volatility, privacy, and regulatory challenges.

3. Core Components of Blockchain

Blockchain mainly consists of two components:

  1. Decentralized Network: Many nodes maintain the ledger, each holding a full copy of the data
  2. Token Incentive Mechanism: The network rewards nodes for validating and packaging transactions, motivating network maintenance

Blockchain workflow:

  1. User initiates a transaction
  2. Transaction is broadcast to the network
  3. Nodes validate the transaction
  4. Validated transactions are packaged into a new block
  5. The new block is linked to the blockchain, and the packaging node receives incentives
  6. All nodes update their ledger

4. Public, Consortium, and Private Blockchains

Public Blockchain

  • Fully open; anyone can join or observe
  • Highest decentralization, lower efficiency
  • Examples: Bitcoin, Ethereum

Consortium Blockchain

  • Maintained by multiple organizations, e.g., banks sharing a ledger
  • Partially open permissions; balances efficiency and transparency

Private Blockchain

  • Restricted to specific organizations or users, similar to internal enterprise databases
  • Lower decentralization but higher efficiency and privacy

The main differences are participation permissions, governance, data transparency, and decentralization level.

5. Web3 vs Web2

  • Web2: User data and content are controlled by centralized companies
  • Web3: Built on blockchain, emphasizing decentralization and giving users more control and privacy

Core principles of Web3:

  • Decentralization
  • Open protocols
  • User-owned data
  • Trustworthy cross-platform interactions